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From Wikipedia, the free encyclopedia

Economic stratification refers to the condition
within a society where social classes are separated, or stratified,
along economic lines. Various economic strata or
levels are clearly manifest. While in any system individual members
will have varying degrees of wealth, economic stratification
typically refers to the condition where there are meaningful gaps
between the wealth controlled by various groups, and few instances
in the transitional regions.

Economic stratification should not be confused with the related
concept, economic inequality. This
deals with the range of wealth, rather than the existence of
distinct strata. Economic inequality and economic stratification
can coincide, of course.

Many of these effects also act as causative factors. This
induces progressively greater stratification unless action is taken
to limit a runaway condition. Corruption of the feedback mechanism
is the most dangerous threat to any balanced system, since it can
lead to economic oscillations of increasing magnitude until runaway
inflation or depression results. A historical example of runaway
stratification is the Great Depression of the late 1920s and
1930s. As monopolies
gained increasing power and influence, the working class gradually lost purchasing
power until other factors, such as the bank failures, coincided to
produce an economic collapse. Such collapses can
occur because the circulation of capital (M1) in such systems becomes highly
dependent upon continually increasing apparent quantities of M2. A percentage of
M2 is continually being converted into M1 until a point is reached
in which the rate of conversion of M2 into M1 cannot be sustained
by the available quantity of M1. In the case of the Great
Depression, M2 refers to stocks and bank notes. When it became
apparent that the valuation of M2 exceeded the supply of M1, a
panic ensued to convert M2 to M1, resulting in the rapid apparent
devaluation of M2, and the Wall Street Crash of 1929. In
the case where M1 is increased to support the increasing conversion
of M2 into M1, inflation increases until the physical supply of M1
becomes unwieldy and the result is also economic collapse, as was
the case in Germany during the
same period.

It is apparent that under these conditions, neither increasing
the supply of M1 nor decreasing it (relative to M2) can effectively
prevent an economic collapse. Therefore, it can be postulated that
economic stratification itself ultimately results in economic
collapse of one degree or another. An effective legislative process
can prolong the period between collapses, but since one of the
effects of stratification is the degradation of this process, it
becomes a self accelerating process.